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Atmos Energy Corporation (NYSE:ATO): Does The Earnings Decline Make It An Underperformer?

Simply Wall St

Examining Atmos Energy Corporation's (NYSE:ATO) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess ATO's latest performance announced on 30 June 2019 and weight these figures against its longer term trend and industry movements.

Check out our latest analysis for Atmos Energy

Did ATO perform worse than its track record and industry?

ATO's trailing twelve-month earnings (from 30 June 2019) of US$491m has declined by -18% compared to the previous year.

Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 15%, indicating the rate at which ATO is growing has slowed down. What could be happening here? Let's examine what's occurring with margins and whether the entire industry is experiencing the hit as well.

NYSE:ATO Income Statement, August 30th 2019

In terms of returns from investment, Atmos Energy has fallen short of achieving a 20% return on equity (ROE), recording 8.7% instead. However, its return on assets (ROA) of 4.6% exceeds the US Gas Utilities industry of 4.4%, indicating Atmos Energy has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Atmos Energy’s debt level, has declined over the past 3 years from 7.9% to 6.3%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. I recommend you continue to research Atmos Energy to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for ATO’s future growth? Take a look at our free research report of analyst consensus for ATO’s outlook.
  2. Financial Health: Are ATO’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2019. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.